020 7898 0500Sterling lost some of its political recovery gains made since Friday as the labour sector data hit the wires. The headline figure that the market was focusing on was the average earning figure of 2.1% following Tuesday’s higher than expected inflation number of 2.9%.
The concern for the central bank is that average earnings fell in real terms by 0.6% in the three months to April. Effectively, this squeezes the consumer further, as it means that inflation is advancing at a faster pace than wage growth which in turn could have an effect on consumer confidence. The other pieces of economic data were slightly more positive as unemployment fell by 50,000 in the three months to April – the lowest since records began in 1975. However, it is the wage growth story that will be of concern.
Meanwhile on the political front, Democratic Unionist Party sources have told the BBC that an announcement on a deal with the Conservatives has been delayed because of the tragic Grenfell Tower blaze. Former Prime Minister David Cameron stated that Theresa May will have to ‘listen to other parties’, whilst the Financial Times stated that there would be pressure for a softer Brexit.
Looking to the day ahead we have the Bank of England meeting where no change to policy is expected. The market will keep a close eye on the statement that follows for clues on future policy. Moreover, they will scrutinise Mark Carney as he is due to speak at the Mansion House Bankers and Merchants Dinner in London.
